MEPs back emissions ‘backloading’ scheme

In a surprise result, MEPs voted yesterday (3 July) to approve an only slightly amended version of the European Commission’s proposal to ‘backload’ allowances in the European Union’s emissions trading scheme (ETS). The purpose of the measure is to raise the flagging price of carbon, which is considered too low to stimulate investments in more sustainable processes.

In April, the Parliament narrowly rejected the proposal and sent it back to committee, because of centre-right concerns that raising the price of carbon would harm energy-intensive industries. Some centre-right MEPs have since been persuaded to change their stance, largely as a result of compromise amendments drawn up by Austrian MEP Richard Seeber designed to compensate industry and hold back the allowances for a shorter period.

A hard-line group of some European People’s Party and all European Conservatives and Reformists MEPs, led by Finnish MEP Eija-Riitta Korhola, refused to support the backloading proposal under any circumstance, and yesterday voted against these compromises. So too did Green MEPs, who feared weakening of the measure. This delivered a majority to reject the compromises, but not a majority to reject the entire proposal, since the Greens voted in favour of the main proposal.

Witholding allowances

The version adopted yesterday, by a vote of 344 to 311, adopts only the small compromises suggested by German centre-left MEP Matthias Groote, who led the effort to approve backloading. It specifies that the Commission cannot withhold more than the 900 million allowances it has proposed, and that it can only undertake this exercise once. The Commission must also conduct an impact assessment to ensure that industry will not flee Europe if the carbon price is artificially raised.

Seeber and his camp of wavering EPP MEPs had said they needed more. A compromise crafted by Seeber and agreed in committee by all groups except the Greens would have required the delayed allowances to be introduced earlier than proposed (2016 rather than 2019). Another compromise, earmarking proceeds from 600m of the withheld allowances for a fund for energy-intensive industries, was rejected. But even without these amendments, the EPP MEPs still voted to approve the main proposal yesterday.

The issue now passes to the Council of Ministers, which has been unable to reach a decision because Germany is divided on the subject. At an informal meeting in Dublin in April, Peter Altmaier, the German environment minister, who supports backloading, said the Parliament’s approval would send the signal needed for Germany to support the measure. Philipp Rösler, the economy minister, is adamantly opposed.

“The next step is now for the Council to take a decision,” said Connie Hedegaard, the European commissioner for climate action, after the vote. “The sooner, the better, so that we can move on to the structural reform of the ETS as soon as possible.”

“The outcome of today’s vote in Parliament came as a bullish surprise to the market,” said Marcus Ferdinand, a carbon market analyst with Point Carbon. “A lot of attention is now shifting towards member states like Germany which remain undecided.”

Green campaigners welcomed the outcome, bu warned that backloading is just a temporary measure to save the flagging ETS. The Commission is due to come out with a proposal for more long-term reform in the autumn.